Cheers for providing your view on the matter. I actually follow a plan similar to Benjamin Graham. Where he recommends 25% equities vs 75% cash/bonds, or the other way around (for example 75% equities vs Cash 25%).
In my opinion, I feel everything in the world is peaking. The Dow Jones is at all-time highs. The ASX is nearing previous highs. Property is at historic highs in Australia. That being said, with QE it is difficult to know how long this money printing obsession will go. That is why I wanted to not miss out on the equity bull market completely. Therefore, I have allocated slightly over 25% towards US/AU equities.
Cash also has its advantages. For example during the 09 GFC, one with cash would have jumped on the hot sales going around. As I mentioned, it just does not make sense to me to buy things at historic highs, which is exactly why I have set the rule of 25% vs 75%. When a crash comes either equities/property or both then I will get in.
Take a look at CBA and TLS. Would you confidently put $1000000 into these stocks and assure long term growth (not after divi but rather long term capital gains)?
I can’t because it just looks darn expensive. Property on the other hand has its advantages. At the very least you have a roof over your head.
I love property. Although, I am not currently invested in it I would love to get in one day. I simply do not think today is the best time to buy. I could be wrong and get burnt more in the long run. If that is the case I am moving to Ireland lol. Others have mentioned that wages need to keep growing to keep up with house prices.
Also note an article stated “the Australian economy is now in worst shape that this time last month. Unemployment hit 13 year highs last month, according to figures from the ABS. Capital expenditure is falling faster than expected and a slowing China, forced its central bank to cut rates on Saturday” -http://www.whocrashedtheeconomy.com.au/blog/2015/03/housing-bubble-prevents-vital-rate-cut/
Also, with IO prices depressed this could also have a negative influence on property prices. Australia has gained a lot wealth from the IO boom as I am sure you would agree.
Anyway, at the end of the day I hope the Australian economy continues to prosper as I have quite a bit invested in IO equities. In addition, a depressed economy means less jobs for myself and my wife. So on balance, I am not hoping for a catastrophic crash but rather a correction of some sort that gives me some sort of mental encouragement I am not paying at the very top off the one way cycle .
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